How Do Presidential Elections Impact Your Portfolio?
On this Election Eve, most investors are asking the same questions. This blog post tackles these tough questions with the evidence-based approach you have come to expect from our boutique wealth management firm.
Who will win?
Of course, we don’t know. Historically it is difficult for an incumbent to seek reelection during a recession, and most of the polls favor Vice President Biden. However, there is some evidence of momentum for President Trump in the Battleground states, so we will have to wait and see if the “shy Trump voter” phenomenon from 2016 repeats in 2020.
How will the election impact my investments?
If your candidate loses the election you are likely to feel more pessimistic about the markets. If your candidate wins you are likely to feel more optimistic. Be careful not to allow politics to overly influence your asset allocation decisions. Remember: we saw the stock market rise under both President Obama and President Trump.
Source: Y Charts
What if the polls are wrong?
Since 1950 the major polls have been wrong three times: 1976, 2012, and 2016. The stock market initially and briefly reacted negatively to the surprise election of Jimmy Carter and Barack Obama in 1976 and 2012 – but all three times the stock market ended the year higher than it was on election day.
The bottom line:
The party in power is only one of many factors that impact your portfolio. Elections often create short-term volatility, and that volatility often leads to opportunities for long-term investors.
If you would like us to review your portfolio or financial situation we’d be happy to help. Contact us to get started.